RIVERSIDE PARK COMMUNITY DEVELOPMENT DISTRICT FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT THEREON ANNUAL AUDIT FOR THE YEAR ENDED SEPTEMBER 30, 2017
SEPTEMBER 30, 2017 TABLE OF CONTENTS Pages Independent Auditor's Report 1-3 Management s Discussion and Analysis (required supplementary information) 4-8 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 9 Statement of Activities 10 Fund Financial Statements Balance Sheet Governmental Funds 11 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position Governmental Activities 12 Statement of Revenues, Expenditures, and Changes in Fund Balances- Governmental Funds 13 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities 14 Notes to the Financial Statements 15-27 Required Supplemental Information Other Than Management s Discussion and Analysis Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund 28 Notes to the Budgetary Required Supplementary Information 29 Other Reports Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performedin Accordance With Government Auditing Standards 30-31 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 32-34 Independent Accountant s Report on Compliance with Section 218.415, Florida Statutes 35
INDEPENDENT AUDITOR'S REPORT To the Board of Supervisors Riverside Park Community Development District Miami-Dade County, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Riverside Park Community Development District (the District ), as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not 1
for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of September 30, 2017, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 8 and the budgetary comparison information on pages 28 and 29 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 11, 2018, on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. West Palm Beach, Florida June 11, 2018 3
MANAGEMENT S DISCUSSION AND ANALYSIS Our discussion and analysis of Riverside Park Community Development District, Miami-Dade County, Florida s ( District ) provides a narrative overview of the District s financial activities for the fiscal year ended September 30, 2017. Please read it in conjunction with the District s Independent Auditor s Report, basic financial statements, accompanying notes and supplementary information to the basic financial statements. FINANCIAL HIGHLIGHTS The liabilities of the District exceeded its assets and deferred outflows at the close of the most recent fiscal year resulting in a net position deficit balance of $594,592. When the District was formed, assets exceeded liabilities and subsequently infrastructure was deeded to Miami-Dade County creating the negative net position. The reason for the transfer of infrastructure was that the County is better able to maintain the infrastructure than the District. The debt related to the assets transferred to the County will be paid by future assessments and as demonstrated by the fund financial statements the District has sufficient resources for current operations. The change in the District s total net position in comparison with the prior fiscal year was an increase of $71,461. The key components of the District s net position and change in net position are reflected in the table in the government-wide financial analysis section. At September 30, 2017, the District s governmental funds reported combined ending fund balances of $232,393, an increase of $31,929 in comparison with the prior year. Of the total fund balance, $99,383 is restricted for debt service and $133,010 is unassigned fund balance which is available for spending at the District s discretion. Financial condition assessment procedures have been applied and no deteriorating financial conditions were noted. OVERVIEW OF FINANCIAL STATEMENTS The discussion and analysis are intended to serve as the introduction to the District s basic financial statements. The District s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. 4
The statement of net position presents information on all the District s assets, deferred outflows of resources, and liabilities, with the residual amount being reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements include all governmental activities that are principally supported by special assessment revenues. The District does not have any business-type activities. The governmental activities of the District include the general government (management) and maintenance functions. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District has one fund category: governmental funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on nearterm inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a District s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains two individual governmental funds. Information is presented separately in the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and debt service fund. The general and debt service funds are considered to be major funds. 5
The District adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with the budget. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of an entity s financial position. In the case of the District, due to the transfer of infrastructure to Miami-Dade County, liabilities exceeded assets and deferred outflows at the close of the most recent fiscal year. Key components of the District s net position are reflected in the following table: NET POSITION SEPTEMBER 30, 2017 2016 Current and other assets $ 242,028 $ 210,274 Capital assets, net of depreciation 588,126 613,652 Total assets 830,154 823,926 Deferred outflows of resources 13,983 14,805 Current liabilities 28,729 29,784 Long-term liabilities 1,410,000 1,475,000 Total liabilities 1,438,729 1,504,784 Net position Net investment in capital assets (150,201) (158,711) Restricted 80,289 77,597 Unrestricted (524,680) (584,939) Total net position (deficit) $ (594,592) $ (666,053) The District s net position reflects its investment in capital assets (e.g., land, land improvements, and infrastructure); less any related debt used to acquire those assets that is still outstanding. These assets are used to provide services to residents; consequently, these assets are not available for future spending. Although the District s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The restricted portion of the District s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position may be used to meet the District s other obligations. 6
The District s net position increased during the most recent fiscal year. The majority of the increase represents the extent to which the ongoing program revenues exceeded the cost of operations and depreciation expense. Key elements of the change in net position are reflected in the following table: CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017 2016 Revenues: Program revenues Charges for services $ 211,152 $ 211,414 Operating grants and contributions 191 94 General revenues 315 1,986 Total revenues 211,658 213,494 Expenses: General government 51,942 53,726 Maintenance and operations 40,375 48,159 Interest 47,880 49,793 Total expenses 140,197 151,678 Change in net position 71,461 61,816 Net position (deficit) beginning (666,053) (727,869) Net position (deficit) ending $ (594,592) $ (666,053) As in the prior fiscal year, program revenues are comprised primarily of assessments. As noted above and in the statement of activities, the cost of all governmental activities during the fiscal year ended September 30, 2017 was $140,197. The costs of the District s activities were primarily funded by program revenues. Program revenues, comprised primarily of assessments, decreased slightly during the fiscal year. GENERAL BUDGETING HIGHLIGHTS An operating budget was adopted and maintained by the government board for the District pursuant to the requirements of Florida Statutes. The budget is adopted using the same basis of accounting that is used in preparation of the fund financial statements. The legal level of budgetary control, the level at which expenditures may not exceed budget is at the aggregate fund level. Any budget amendments that increase the aggregate budgeted appropriations must be approved by the Board of Supervisors. The 2017 general fund budget was amended to increase revenues by $1,571 and decrease appropriations by $23,282. The actual general fund expenditures for the 2017 fiscal year were lower than budgeted amounts due primarily to anticipated costs which were not incurred in the current fiscal year. 7
CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At September 30, 2017, the District had $932,727 invested in capital assets for its governmental activities. In the government-wide financial statements depreciation of $344,601 has been taken, which resulted in a net book value of $588,126. More detailed information about the District s capital assets is presented in the notes to the financial statements. The following is a summary of capital assets as of September 30: 2016 2017 Surface water management $ 844,406 $ 844,406 Wall and landscaping improvements 88,321 88,321 932,727 932,727 Less accumulated depreciation 319,075 344,601 Totals $ 613,652 $ 588,126 Long-Term Liabilities At September 30, 2017, the District had $1,410,000 in Bonds outstanding for its governmental activities. More detailed information about the District s long-term liabilities is presented in the notes of the financial statements. The following is a summary of long-term liabilities as of September 30: 2016 2017 Bonds payable, Series 2014 $ 1,475,000 $ 1,410,000 ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND OTHER EVENTS The District does not anticipate any major projects or significant changes to its infrastructure maintenance program for the subsequent fiscal year. In addition, it is anticipated that the general operations of the District will remain fairly constant. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, landowners, customers, and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the financial resources it manages and the stewardship of the facilities it maintains. If you have questions about this report or need additional financial information, contact the Riverside Park Community Development District s management services at Special District Services, Inc., 2501A Burns Road, Miami-Dade Gardens, Florida 33410. 8
Statement of Net Position September 30, 2017 Total Governmental Activities Assets Current assets: Cash $ 142,645 Investments 99,383 Total current assets 242,028 Noncurrent assets: Capital assets Depreciable (net of depreciation) 588,126 Total noncurrent assets 588,126 Total assets 830,154 Deferred outflows of resources Deferred loss on bond refunding, net 13,983 Liabilities Current liabilities: Accounts payable 9,635 Accrued interest payable 19,094 Total current liabilities 28,729 Noncurrent liabilities Due within one year 65,000 Due in more than one year 1,345,000 Total noncurrent liabilities 1,410,000 Total liabilities 1,438,729 Net position Net investment in capital assets (150,201) Restricted for debt service 80,289 Unrestricted (524,680) Total net position $ (594,592) See notes to the financial statements 9
Statement of Activities For the Year Ended September 30, 2017 Program Revenues Charges Operating Grants Capital Grants Total For and and Governmental Function / Program Activities Expenses Services Contributions Contributions Activities Governmental activities General government $ 51,942 $ 51,942 $ $ $ Maintenance and operations 40,375 44,651 4,276 Interest on long term debt 47,880 114,559 191 66,870 Total governmental activities 140,197 211,152 191 71,146 General revenues Investment earnings - unrestricted 315 Total general revenues 315 Change in net position 71,461 Net position, beginning of year (666,053) Net position, end of year $ (594,592) See notes to the financial statements 10
Balance Sheet Governmental Funds September 30, 2017 Major Funds Debt Total General Service Governmental Fund Fund Funds Assets Cash $ 142,645 $ $ 142,645 Investments 99,383 99,383 Total assets $ 142,645 $ 99,383 $ 242,028 Liabilities and fund balances Liabilities Accounts payable $ 9,635 $ $ 9,635 Total liabilities 9,635 9,635 Fund balances Restricted Debt service 99,383 99,383 Unassigned 133,010 133,010 Total fund balances 133,010 99,383 232,393 Total liabilities and fund balances $ 142,645 $ 99,383 $ 242,028 See notes to the financial statements 11
Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position - Governmental Activities September 30, 2017 Fund balances total governmental funds $ 232,393 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets 932,727 Less accumulated depreciation (344,601) 588,126 Governmental funds report loss on debt refunding as an expenditure when those costs are first incurred because they require the use of current financial resources. However, loss on debt refunding is included as a deferred outflow of resources in the government-wide financial statements Deferred loss on refunding 13,983 Long-term liabilities, including notes and bonds payable, are not due and payable in the current period and therefore are not reported in the funds. Long-term liabilities at year-end consists of: Accrued interest payable (19,094) Bonds payable (1,410,000) (1,429,094) Net position of governmental activities $ (594,592) See notes to the financial statements 12
Combined Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2017 Major Funds Debt Total General Service Governmental Fund Fund Funds Revenues Assessments $ 96,593 $ 114,559 $ 211,152 Investment earnings 315 191 506 Total revenues 96,908 114,750 211,658 Expenditures Current General government 51,942 51,942 Maintenance 14,849 14,849 Debt service Principal 65,000 65,000 Interest 47,938 47,938 Total expenditures 66,791 112,938 179,729 Excess of revenues over (under) expenditures 30,117 1,812 31,929 Fund balances - beginning of year 102,893 97,571 200,464 Fund balances - end of year $ 133,010 $ 99,383 $ 232,393 See notes to the financial statements 13
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities For the Year Ended September 30, 2017 Net change in fund balances $ 31,929 Amounts reported for governmental activities in the statement of activities are different because: Depreciation on capital assets is not recognized in the governmental fund financial statement but is reported as an expense in the statement of activities: Current year depreciation (25,526) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position: Repayment of debt principal 65,000 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Amortization of loss on refunding (822) Change in accrued interest 880 58 Change in net position $ 71,461 See notes to the financial statements 14
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Riverside Park Community Development District ( District ) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The District s significant accounting policies are described below. Reporting Entity The District was created by Miami-Dade County Ordinance 03-181 effective 2003 pursuant to the Uniform Community Development District Act of 1980, otherwise known as Chapter 190, Florida Statutes. The Act provides among other things, the power to manage basic services for community development, power to borrow money and issue bonds, and to levy and assess non-ad valorem assessments for the financing and delivery of capital infrastructure. The District was established for the purposes of financing and managing the acquisition, construction, maintenance and operation of a portion of the infrastructure necessary for community development within the District. The District is governed by the Board of Supervisors ( Board ) which is composed of five members. The Supervisors are elected on an at large basis by the owners of the property within the District. Ownership of and within the District entitles the owner to one vote per acre. The Board of Supervisors of the District exercise all powers granted to the District pursuant to Chapter 190, Florida Statutes. The Board has the final responsibility for: 1. Assessing and levying assessments. 2. Approving budgets. 3. Exercising control over facilities and properties. 4. Controlling the use of funds generated by the District. 5. Approving the hiring and firing of key personnel. 6. Financing improvements. As required by generally accepted accounting principles, these financial statements include the District (the primary government) and its component units. Component units are legally separate entities for which the District is financially accountable. The District is financially accountable if: a) the District appoints a voting majority of the organization s governing board and (1) the District is able to impose its will on the organization or (2) there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the District, or 15
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reporting Entity (Continued) b) the organization is fiscally dependent on the District and (1) there is a potential for the organization to provide specific financial benefits to the District or (2) impose specific financial burdens on the District. Organizations for which the District is not financially accountable are also included when doing so is necessary in order to prevent the District s financial statements from being misleading. Based upon application of the above criteria, management of the District has determined that no component units exist which would require inclusion in this report. Further, the District is not aware of any entity that would consider the District to be a component unit. Government-Wide and Fund Financial Statements The basic financial statements include both government-wide and fund financial statements. The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment; operating-type special assessments for maintenance and debt service are treated as charges for services, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Other items not included among program revenues are reported instead as general revenues. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Assessments are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 16
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental Funds Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. The District reports the following major governmental funds: General Fund The general fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund The debt service fund is used to account for the accumulation of resources for the annual payment of principal and interest on long-term debt. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Restricted Assets These assets represent cash and investments set aside pursuant to Bond covenants or other contractual restrictions. Deposits and Investments The District s cash and cash equivalents are considered to be cash on hand and demand deposits (interest and non-interest bearing). The District has elected to proceed under the Alternative Investment Guidelines as set forth in Section 218.415 (17) Florida Statutes. The District may invest any surplus public funds in the following: a. The Local Government Surplus Trust Funds, or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act; 17
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deposits and Investments (Continued) b. Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency; c. Interest bearing time deposits or savings accounts in qualified public depositories; d. Direct obligations of the U.S. Treasury. Securities listed in paragraph c and d shall be invested to provide sufficient liquidity to pay obligations as they come due. Unspent Bond proceeds or Bond Reserve accounts are required to be held in investments as specified in the Bond Indenture. Investments are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available; for others, it might not be available. However, the objective of fair value measurement in both cases is the same, that is, to determine the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Fair value is an exit price at the measurement date from the perspective of a market participant that controls the asset or is obligated for the liability. The District categorizes investments reported at fair value in accordance with the fair value hierarchy established by GASB Statement No. 72, Fair Value Measurement and Application. The District records all interest revenue to investment activities in the respective funds. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. In the governmental funds, prepaid items are recorded using the consumption method and are offset by the nonspendable fund balance component which indicates they do not constitute available spendable resources, even though they are a component of current assets. 18
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets Capital assets, which include property, plant and equipment, and infrastructure assets (e.g., roads, sidewalks and similar items) are reported in the governmental activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical costs or estimated historical cost if purchased or constructed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition cost. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant and equipment of the District are depreciated using the straight-line method over the following estimated useful lives: Assets Years Surface Water Management 40 Wall and Landscaping Improvements 20 In the governmental fund financial statements, amounts incurred for the acquisition of capital assets are reported as fund expenditures. Depreciation expense is not reported in the governmental fund financial statements. Deferred Outflow of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and thus, will not be recognized as an outflow of resources (expense/expenditure) until that time. The District only has one item that qualifies for reporting in this category. It is the deferred amount on bond refunding. The deferred loss on bond refunding is being amortized, using the straight line method, and reported as a component of interest expense. The amortization period of deferred losses on refunding of debt is the remaining life of the old debt or the life of the new debt, whichever is shorter. 19
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Inflow of Resources In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Currently, the District does not report any Deferred Inflows of Resources. Unearned Revenue The District reports unearned revenue on its government wide Statement of Net Position and governmental funds balance sheet. Unearned revenue arises when resources are obtained prior to revenue recognition. In subsequent periods, when revenue recognition criteria are met the unearned revenue is removed and revenue is recognized. Long-Term Obligations In the government-wide financial statements long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Bond premiums and discounts are deferred and amortized over the life of the Bonds. Bonds payable are reported net of applicable premiums or discounts. Bond issuance costs are expensed when incurred. In the fund financial statements, governmental fund types recognize premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Balance In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on the extent to which the District is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balance is reported under the following categories: 1. Nonspendable fund balance represents amounts that are not in spendable form or are legally or contractually required to be maintained intact. 20
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance (Continued) 2. Restricted fund balance represents amounts that can be spent only for specific purposes stipulated by external providers (e.g. creditors, grantors, contributor, or laws or regulations of other governments) or imposed by law through constitutional provisions or enabling legislation. 3. Committed fund balance represents amounts that can be used only for the specific purposes determined by formal action (ordinance) of the Board of Supervisors. Commitments may be changed or lifted only by the Board of Supervisors taking the same formal action (ordinance). 4. Assigned fund balance includes spendable fund balance amounts that are intended to be used for specific purposes, as expressed by the Board of Supervisors, that are neither considered restricted or committed. The Board may also assign fund balance as it does when appropriating fund balance to cover differences in estimated revenue and appropriations in the subsequent year s appropriated budget. Assignments are generally temporary and normally the same formal action need not be taken to remove the assignment. 5. Unassigned fund balance is the residual fund balance classification for the general fund. It is also used to report negative fund balances in other governmental funds. When an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, it is the District s policy to reduce restricted amounts first. When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used, it is the District s policy to reduce committed amounts first, followed by assigned amounts, and then unassigned amounts. Net Position Net position is the residual of all other elements presented in a statement of financial position. It is the difference between (a) assets plus deferred outflows of resources and (b) liabilities and deferred inflows of resources. Net position is displayed in the following three components: 1. Net investment in capital assets Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. 21
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Position (Continued) 2. Restricted net position Consists of net position with constraints placed on the use either by: (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions of enabling legislation. 3. Unrestricted net position All other net position that does not meet the definition of restricted or net investment in capital assets. Assessments Assessments are non-ad valorem assessments on certain land and all platted lots within the District. Assessments are levied each November 1 on property of record as of the previous January. The fiscal year for which annual assessments are levied on October 1 with discounts available for payments through February 28 and become delinquent on April 1. For debt service assessments, amounts collected as advance payments are used to prepay a portion of the Bonds outstanding. Otherwise, assessments are collected annually to provide funds for the debt service on the portion of the Bonds which are not paid with prepaid assessments. Assessments and interest associated with the current fiscal period are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. The portion of assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the District. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. NOTE 2 BUDGETARY INFORMATION The District is required to establish a budgetary system and an approved Annual Budget. Annual Budgets are adopted on a basis consistent with generally accepted accounting principles for the general fund. All annual appropriations lapse at fiscal year end. 22
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 2 BUDGETARY INFORMATION (Continued) The District follows these procedures in establishing the budgetary data reflected in the financial statements. a. Each year the District Manager submits to the District Board a proposed operating budget for the fiscal year commencing the following October 1. b. Public hearings are conducted to obtain public comments. c. Prior to October 1, the budget is legally adopted by the District Board. d. Any budget amendments that increase the aggregate budgeted appropriations must be approved by the District Board. The legal level of control is at the fund level. e. Unused appropriation for annually budget funds lapse at the end of the year. NOTE 3 DEPOSITS AND INVESTMENTS Deposits In addition to insurance provided by the Federal Depository Insurance Corporation, deposits are held in banking institutions approved by the Treasurer of the State of Florida. Under Florida Statutes, Chapter 280, Florida Security for Public Deposits Act, the State Treasurer requires all Florida qualified public depositories to deposit with the Treasurer or other banking institution eligible collateral. In the event of failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses. The District s deposits at year end are considered insured for custodial credit risk purposes. As of September 30, 2017, the bank balance of the District s deposits totaled $142,645 and the carrying amount was $142,645. Investments GASB Statement No. 72, Fair Value Measurement and Application, requires governments to disclose the fair value hierarchy for each type of asset or liability measured at fair value in the notes to the financial statements. The standard also requires governments to disclose a description of the valuation techniques used in the fair value measurement and any significant changes in valuation techniques. GASB 72 establishes a three-tier fair value hierarchy. The hierarchy is based on valuation inputs used to measure the fair value as follows: Level 1: Level 2: Inputs are directly observable, quoted prices in active markets for identical assets or liabilities. Inputs are other than quoted prices included within Level 1 that are for the asset or liability, either directly or indirectly. These inputs are derived from or corroborated by observable market data through correlation or by other means. 23
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 3 DEPOSITS AND INVESTMENTS (Continued) Investments (Continued) Level 3: Inputs are unobservable inputs used only when relevant Level 1 and Level 2 inputs are unavailable. The level in which an asset is assigned is not indicative of its quality but an indication of the source of valuation inputs. The District s investments were as follows at September 30, 2017: Fair Value Credit Rating Maturities U.S. Bank Commercial Paper $ 99,383 S&P A-1+ Open ended The fair value of Commercial Paper is measured at amortized cost and is exempt from the fair value hierarchy rules under GASB 72. Credit risk For investments, credit risk is generally the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Investment ratings by investment type are included in the preceding summary of investments. Concentration risk The District places no limit on the amount the District may invest in any one issuer. Interest rate risk The District does not have a formal policy that limits investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates. However, the Bond Indenture limits the type of investments held using unspent proceeds. 24
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 4 CAPITAL ASSETS Capital asset activity for the fiscal year ended September 30, 2017 was as follows: Beginning Balance Additions Reductions Ending Balance Governmental activities Capital assets, being depreciated Surface water management $ 844,406 $ $ $ 844,406 Wall and landscaping improvements 88,321 88,321 Total capital assets, being depreciated 932,727 932,727 Less accumulated depreciation for: Surface water management (263,879) (21,110) (284,989) Wall and landscaping improvements (55,196) (4,416) (59,612) Total accumulated depreciation (319,075) (25,526) (344,601) Total capital assets, being depreciated, net 613,652 (25,526) 588,126 Governmental activities capital assets, net $ 613,652 $ (25,526) $ $ 588,126 Depreciation expense was charged to the maintenance and operations function. NOTE 5 LONG-TERM LIABILITIES Special Assessment Refunding Bonds, Series 2014 On May 20, 2014, the District issued $1,630,000 of Special Assessment Refunding Bonds, Series 2014, with an interest rate of 3.25%. The bonds were used to refinance all of the outstanding Special Assessment Improvement Bonds, Series 2004. Principal and interest are payable semiannually on May 1 and November 1, commencing November 1, 2014. The bonds mature on May 1, 2034. The Series 2014 bonds are subject to optional redemption, in whole or in part, on any date at a redemption price equal to 101% of the principal amount of the bond to be optionally redeemed in the second year after issuance and 100% thereafter, plus accrued interest to the optional redemption date. The Bonds are subject to extraordinary mandatory redemption prior to their selected maturity in the manner determined by the Bond Registrar if certain events occurred as outlined in the Bond Indenture. On November 1, 2015, the District partially redeemed Series 2014 Bonds in the principal amount of $35,000. 25
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 5 LONG-TERM LIABILITIES (Continued) Special Assessment Refunding Bonds, Series 2014 (Continued) The Bond Indenture established a debt service reserve requirement as well as other restrictions and requirements relating principally to the use of proceeds to pay for the infrastructure improvements and the procedures to be followed by the District on assessments to property owners. The District agrees to levy special assessments in annual amounts adequate to provide payment of debt service and to meet the reserve requirements. The District is in compliance with those requirements of the Bond Indenture at September 30, 2017. Changes in the District s long-term liabilities for the fiscal year ended September 30, 2017 were as follows: Beginning Balance Additions Reductions Ending Balance At September 30, 2017, the scheduled debt service requirements on the long-term debt were as follows: Governmental Activities Year Ending September 30: Principal Interest Total 2018 $ 65,000 $ 45,825 $ 110,825 2019 65,000 43,713 108,713 2020 70,000 41,600 111,600 2021 70,000 39,325 109,325 2022 75,000 37,050 112,050 2023-2027 405,000 147,550 552,550 2028-2032 455,000 78,487 533,487 2033-2034 205,000 10,075 215,075 Total $ 1,410,000 $ 443,625 $ 1,853,625 Due Within One Year Governmental activities Bonds payable; Series 2014 $1,475,000 $ $ (65,000) $1,410,000 $ 65,000 Total $1,475,000 $ $ (65,000) $1,410,000 $ 65,000 26
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 6 DEFICIT NET POSITION The District has a government-wide net position financial deficit of $594,592 as of September 30, 2017. The deficit in the government-wide statement of net position primarily relates to the excess of the amount of long-term debt outstanding over the amount of capital assets, net of accumulated depreciation. During prior years, various infrastructure improvements necessary to complete the District were financed through the issuance of long-term debt but were conveyed to other entities for maintenance. Those capital assets are not included in the assets of the District; however, the long-term debt associated with those assets remains a liability of the District. NOTE 7 MANAGEMENT COMPANY The District has contracted with a management company to perform management advisory services, which include financial and accounting advisory services. Certain employees of the management company also serve as officers of the District. Under the agreement, the District compensates the management company for management, accounting, financial reporting, computer and other administrative costs. NOTE 8 RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District has obtained commercial insurance from independent third parties to mitigate the costs of these risks; coverage may not extend to all situations. Settled claims from these risks have not exceeded commercial insurance coverage over the past three years. Florida Statues limit the District s maximum loss for most liability claims to $200,000 per person and $300,000 per occurrence under the Doctrine of Sovereign Immunity. However, under certain circumstances, a plaintiff can seek to recover damages in excess of statutory limits by introducing a claims bill to the Florida Legislature. The limits addressed in Florida Statutes do not apply to claims filed in Federal courts. 27